Exhibit 4.1
NLMIN #____
NEITHER THIS NOTE, THE SHARES OF COMMON STOCK NOR ANY OTHER SECURITIES ISSUABLE
UPON CONVERSION OF THIS NOTE (COLLECTIVELY THE "SECURITIES") HAVE BEEN ACQUIRED
FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") SHALL HAVE
BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS
LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE AND ANY
SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE.
NEWTOWN LANE MARKETING, INCORPORATED
10% Convertible Promissory Note
$____________ ________ ___, 2005
FOR VALUE RECEIVED, Newtown Lane Marketing, Incorporated, a Delaware
corporation (the "Company") with its principal executive office at 33 Newtown
Lane, East Hampton, NY 11937, promises to pay to the order of _________________
(the "Payee" or the "Holder of this Note") or registered assigns on December 31
2007 (the "Maturity Date"), the principal amount of _____________ Dollars
($________) (the "Principal Amount") in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts. Interest on this Note shall accrue on the
Principal Amount outstanding from time to time at a rate of ten percent (10%)
per annum, compounded annually, and shall be payable on the Maturity Date, or
earlier upon conversion of this Note in accordance with the provisions of
Section 6 hereof (or as may otherwise be provided in this Note). Nothing in item
(ii) of this paragraph shall be construed as the consent by the holder of this
Note to any action otherwise prohibited by the terms of this Note or as a waiver
of any such prohibition.
This Note and other identical Notes in the aggregate principal amount of
up to $500,000 (collectively, the "Notes") are issued to the Payee and other
purchasers of Notes in connection with a private placement of Units by the
Company (the "Financing"), pursuant to the Company's Confidential Offering
Memorandum (the "Memorandum"), and a Subscription Agreement between the Company
and the Payee (the "Subscription Agreement"), a copy of which documents are
available for inspection at the Company's principal office.
Notwithstanding any provision to the contrary contained herein, this Note
is subject and entitled to certain terms, conditions, covenants and agreements
contained in the Subscription Agreement. Any transferee of this Note, by its
acceptance hereof, assumes the obligations of the Payee in the Subscription
Agreement with respect to the conditions and procedures for transfer of this
Note. Reference to the Subscription Agreement shall in no way impair the
absolute and unconditional obligation of the Company to pay both principal
hereof and interest hereon as provided herein.
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Each payment by the Company pursuant to this Note shall be made without
set-off or counterclaim and in immediately available funds.
The Company (i) waives presentment, demand, protest or notice of any kind
in connection with this Note and (ii) agrees, in the event of an Event of
Default, to pay to the holder of this Note, on demand, all costs and expenses
(including reasonable legal fees and expenses) incurred in connection with the
enforcement and collection of this Note.
1. Prepayment. This Note and all other Notes may be prepaid in whole but
not in part prior to the Maturity Date if the Company sends written notice of
such prepayment to each Holder at least twenty-five (25) days prior to the
prepayment date and each Noteholder during such 25-day period shall have the
right to convert the Note into Conversion Shares as provided herein.
2. Shares. In consideration for the loan evidenced by this Note, the
Company issued to the Holders of this Note, shares of common stock of the
Company (the "Common Stock") to the product of (i) (1) the aggregate principal
amount of each Note, multiplied by (2) twenty (20%) percent, and (ii) divided by
thirty-five cents ($0.35).
3. Covenants of Company.
A. Affirmative Covenants. The Company covenants and agrees that, so
long as this Note shall be outstanding, it will perform the obligations set
forth in this Section 4A:
(i) Taxes and Levies. The Company will promptly pay and
discharge all taxes, assessments, and governmental charges or levies
imposed upon the Company and each of its subsidiaries or upon either of
their income and profits, or upon any of its property, before the same
shall become delinquent, as well as all claims for labor, materials and
supplies which, if unpaid, might become a lien or charge upon such
properties or any part thereof; provided, however, that the Company and
each of its subsidiaries shall not be required to pay and discharge any
such tax, assessment, charge, levy or claim so long as the validity
thereof shall be contested in good faith by appropriate proceedings and
the Company and each of its subsidiaries shall set aside on its books
adequate reserves in accordance with generally accepted accounting
principles ("GAAP") with respect to any such tax, assessment, charge, levy
or claim so contested;
(ii) Maintenance of Existence. The Company will do or cause to
be done all things reasonably necessary to preserve and keep in full force
and effect its corporate existence, rights and franchises and comply with
all laws applicable to the Company, except where the failure to comply
could not reasonably be expected to have a material adverse effect on the
Company;
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(iii) Maintenance of Property. The Company will at all times
maintain, preserve, protect and keep such property material to the conduct
of its business in good repair, working order and condition, and from time
to time make all needful and proper repairs, renewals, replacements and
improvements thereto as shall be reasonably required in the conduct of its
business;
(iv) Insurance. The Company will, to the extent necessary for
the operation of its business, keep adequately insured by financially
sound reputable insurers, all property of a character usually insured by
similar corporations and carry such other insurance as is usually carried
by similar corporations;
(v) Books and Records. The Company and each of its
subsidiaries will at all times keep true and correct books, records and
accounts reflecting all of their respective business affairs and
transactions in accordance with GAAP. Such books and records shall be open
at reasonable times and upon reasonable notice to the inspection of the
Payee or its agents, subject to the execution by such persons of a
reasonable non-disclosure agreement;
(vi) Underlying Securities. The Company shall keep reserved
such number of shares of Common Stock as will permit full conversion of
the Notes;
(vii) Notice of Certain Events. The Company will give prompt
written notice (with a description in reasonable detail) to the Payee of:
(a) the occurrence of any Event of Default (as defined
in Section 5 hereof), or any event which, with the giving of notice
or the lapse of time, would constitute an Event of Default, or an
event of default under any document or instrument evidencing or
governing any indebtedness of the Company and the delivery of any
notice effecting the acceleration of any such indebtedness; and
(b) the occurrence of any litigation, arbitration or
governmental investigation or proceeding not previously disclosed by
the Company to the Payee in writing which has been instituted or, to
the knowledge of the Company, is threatened, against the Company or
to which any of its properties, assets or revenues is subject which,
if adversely determined, would reasonably be expected to have a
material adverse effect on the Company; and
(c) any material adverse development which shall occur
in any litigation, arbitration or governmental investigation or
proceeding previously disclosed by the Company to the Payee.
B. Negative Covenants. The Company covenants and agrees that, other
than as may be expressed provided herein, so long as this Note shall be
outstanding, it will perform the obligations set forth in this Section 4B:
(i) Liquidation, Dissolution, Etc.. Unless the Company prepays
the Note upon 25 days written notice during which the Holder may convert
into Conversion Shares as provided herein, the Company will not liquidate
or dissolve, consolidate with, or merge into or with, any other
corporation or other entity, except that any wholly-owned subsidiary may
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merge with another wholly-owned subsidiary or with the Company (so long as
the Company is the surviving entity and no Event of Default shall occur as
a result thereof).
(ii) Sales of Assets. Unless the Company prepays the Note upon
25 days written notice during which the Holder may convert into Conversion
Shares as provided herein, the Company will not sell, transfer, lease or
otherwise dispose of, or grant options, warrants or other rights with
respect to, all or a substantial part of its properties or assets (an
"Asset Transaction") to any person or entity, provided that this clause
(ii) shall not restrict (1) any disposition made in the ordinary course of
business and consisting of (a) capital goods that are obsolete or have no
remaining useful life or (b) finished goods inventories or (2) any other
Asset Transaction.
(iii) Redemptions. The Company will not redeem or repurchase
any outstanding securities of the Company or any of its subsidiaries;
(iv) Investments. Except for standard and normal industry
related investments, the Company will not purchase, own, invest in or
otherwise acquire, directly or indirectly, any stock or other securities
or make or permit to exist any investment or capital contribution or
acquire any interest whatsoever in any other person or entity or permit to
exist any loans or advances for such purposes except for investments in
direct obligations of the United States of America or any agency thereof,
obligations guaranteed by the United States of America and certificates of
deposit or other obligations of any bank or trust company organized under
the laws of the United States or any state thereof and having capital and
surplus of at least $500,000,000.
(v) Transactions with Affiliates. The Company will not repay
any indebtedness or enter into any transaction, including, without
limitation, the purchase, sale, lease or exchange of property, real or
personal, the purchase or sale of any security, the borrowing or lending
of any money, or the rendering of any service, with any person or entity
affiliated with the Company (including any officers, directors and
shareholders of the Company's and/or any of its subsidiaries' outstanding
capital stock); and
(vi) Dividends. The Company will not accrue, declare or pay
any cash dividends or distributions, whether accrued or otherwise, on its
outstanding capital stock, provided, however, that nothing herein
contained shall prevent the Company (a) from effecting a stock split or
declaring or paying any dividend consisting solely of shares of any class
of Common Stock to the holders of shares of such class of Common Stock,
provided that (i) such stock split or stock dividend is effected equally
across all classes of Common Stock and (ii) the Holder of the Note
participates in such events as if the holder had converted the Note
immediately prior to such event into the number of shares of Common Stock
he would be entitled to receive if he had so converted (or the number of
shares of Common Stock (as defined below) is convertible into), as more
fully described in the anti-dilution provisions below; and (b) so long as
the Company is taxed under Subchapter S of the Internal Revenue Code, from
declaring and paying such cash dividends as are necessary to enable each
of the Company's shareholders to pay their income taxes on the portion of
the Company's income allocable to him.
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5. Events of Default.
A. The term "Event of Default" shall mean any of the events set
forth in this Section 5A:
(i) Non-Payment of Obligations. The Company shall default in
the payment of the principal or accrued interest on this Note when and as
the same shall become due and payable, whether by acceleration or
otherwise.
(ii) Non-Performance of Affirmative Covenants. The Company
shall default in the due observance or performance of any covenant set
forth in Section 4A, which default shall continue uncured for five (5)
business days.
(iii) Non-Performance of Negative Covenants. The Company or
any of its subsidiaries shall default in the due observance or performance
of any covenant set forth in Section 4B.
(iv) Bankruptcy, Insolvency, etc. The Company shall: (a)
generally fail or be unable to pay, or admit in writing its inability to
pay, its debts as they become due; (b) apply for, consent to, or acquiesce
in, the appointment of a trustee, receiver, sequestrator or other
custodian for the Company or any of its property, or make a general
assignment for the benefit of creditors; (c) in the absence of such
application, consent or acquiesce in, permit or suffer to exist the
appointment of a trustee, receiver, sequestrator or other custodian for
the Company or for any part of its property, and such trustee, receiver,
sequestrator or other custodian shall not be discharged within thirty (30)
days; (d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or
liquidation proceeding, in respect of the Company, and, if such case or
proceeding is not commenced by the Company or converted to a voluntary
case, such case or proceeding shall be consented to or acquiesced in by
the Company or shall result in the entry of an order for relief or shall
remain for sixty (60) days undismissed; or (e) take any corporate action
authorizing, or in furtherance of, any of the foregoing; and
(viii) Subscription Agreement; Etc. The Company shall violate
any material representation, warranty, covenant, agreement or obligation
set forth in the Subscription Agreement, and such default is continuing
for ten (10) days.
B. Action if Event of Default. If any Event of Default shall occur
for any reason, whether voluntary or involuntary, and be continuing, the Payee
may, upon notice to the Company, (i) allow the Note to remain outstanding and
continue to accrue interest at the rate provided for above or (ii) declare all
or any portion of the outstanding Principal Amount of the Note together with
interest accrued thereon to be due and payable and any or all other obligations
hereunder to be due and payable, whereupon the full unpaid Principal Amount (or
any portion thereof so demanded), such accrued interest and any and all other
such obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand, or presentment.
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D. Remedies. In case any Event of Default shall occur and be
continuing, the Payee may proceed to protect and enforce its rights by a
proceeding seeking the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note or may proceed to enforce the payment of this Note or to enforce any other
legal or equitable rights as such holder shall determine.
6. Conversion.
A. Holder's Conversion Right. At any time and from time to time, the
Holder of this Note shall be entitled to convert any portion of the Principal
Amount and/or accrued but unpaid interest into fully paid and non-assessable
shares of Common Stock, in accordance with this Section 6(a) and Sections 6(b)
and Section 6(c). The Company shall not issue any fraction of a share of Common
Stock upon any conversion. All shares of Common Stock (including fractions
thereof) issuable upon conversion of the Notes by a holder thereof shall be
aggregated for purposes of determining whether the conversion would result in
the issuance of a fraction of a share of Common Stock. If, after the
aforementioned aggregation, the issuance would result in the issuance of a
fraction of a share of Common Stock, the Company shall, in lieu of issuing such
fractional share, pay to the holder the fair value thereof in cash.
B. Conversion Price. Subject to anti-dilution adjustment as provided
in Section 6D, the "Conversion Price" of the outstanding Principal Amount of the
Notes shall be equal to thirty-five cents ($0.35). The Principal Amount and
interest thereon so elected by the Holder to be converted (the "Converted
Amount"), will convert into that number of shares of Common Stock determined by
dividing the Converted Amount by the Conversion Price, as adjusted at the time
of conversion.
C. Mechanics of Conversion. To convert the Note into shares of
Common Stock on any date (a "Conversion Date"), the holder thereof shall (i)
transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59
p.m., New York time on such date, a copy of an executed notice of conversion in
the form attached hereto as Exhibit I (the "Conversion Notice") to the Company,
and (ii) surrender to a common carrier for delivery to the Company within three
(3) business days of such date the original Note being converted (or an
indemnification undertaking with respect to such Note in the case of their loss,
theft or destruction); provided, however, notwithstanding anything to the
contrary provided herein or elsewhere, the Holder in its sole option and in its
sole discretion shall have the absolute right to instead of submitting the
original Note to the Company as provided above upon a conversion of the Note,
not submit the Note to the Company upon a conversion and have the Company reduce
the Principal Amount being converted on the Company's books and records in the
amount as expressly provided in the Conversion Notice, which shall have the same
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effect as if the Holder submitted the original Note. On or before the third
(3rd) business day following the date of receipt of a Conversion Notice and the
original Note, or an affidavit that the Holder lost its original Note (the
"Share Delivery Date"), the Company shall issue and deliver to the address as
specified in the Conversion Notice, a certificate, registered in the name of the
holder or its designee, for the number of shares of Common Stock to which the
holder shall be entitled. If the Principal Amount represented by the Note(s)
submitted for conversion pursuant to this Section 6C(ii) is greater than the
Converted Amount, and the Holder has elected to submit the original Note to the
Company then the Company shall, as soon as practicable and in no event later
than three (3) business days after receipt of the Notes (the "Note Delivery
Date") and at its own expense, issue and deliver to the holder a new Note
representing the Principal Amount not converted. The person or persons entitled
to receive the shares of Common Stock issuable upon a conversion of Note shall
be treated for all purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date.
D. Anti-Dilution Provisions. The Conversion Price in effect at any
time and the number and kind of securities issuable upon conversion of the Notes
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
(i) Adjustment for Stock Splits and Combinations. If the
Company at any time or from time to time on or after the date of any
issuance of any Notes (the "Original Issuance Date"), effects a
subdivision of the outstanding Common Stock, the Conversion Price then in
effect immediately before that subdivision shall be proportionately
decreased, and conversely, if the Company at any time or from time to time
on or after the Original Issuance Date combines the outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price then in
effect immediately before the combination shall be proportionately
increased. Any adjustment under this subsection (i) shall become effective
at the close of business on the date the subdivision or combination
becomes effective.
(ii) Adjustment for Certain Dividends and Distributions. If
the Company at any time or from time to time on or after the Original
Issuance Date makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other
distribution payable in additional shares of Common Stock, then and in
each such event the Conversion Price then in effect shall be decreased as
of the time of such issuance or, in the event such record date is fixed,
as of the close of business on such record date, by multiplying the
Conversion Price then in effect by a fraction (1) the numerator of which
is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on
such record date and (2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in payment of such
dividend or distribution; provided, however, that if such record date is
fixed and such dividend is not fully paid or if such distribution is not
fully made on the date fixed therefor, the Conversion Price shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Conversion Price shall be adjusted pursuant to this
subsection (ii) as of the time of actual payment of such dividends or
distributions.
(iii) Adjustments for Other Dividends and Distributions. In
the event the Company at any time or from time to time on or after the
Original Issuance Date makes, or fixes a record date for the determination
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of holders of Common Stock entitled to receive, a dividend or other
distribution payable in securities of the Company other than shares of
Common Stock, then and in each such event provision shall be made so that
the holders of the Notes shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Company which they would have received had
their Notes been converted into Common Stock on the date of such event and
had they thereafter, during the period from the date of such event to and
including the conversion date, retained such securities receivable by them
as aforesaid during such period, subject to all other adjustments called
for during such period under this subsection (e) with respect to the
rights of the holders of the Notes
(iv) Adjustment for Reclassification, Exchange and
Substitution. In the event that at any time or from time to time on or
after the Original Issuance Date, the Common Stock issuable upon the
conversion of the Notes is changed into the same or a different number of
shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or
sale of assets, provided for elsewhere in this subsection (e)), then and
in any such event each holder of the Notes shall have the right thereafter
to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization,
reclassification or other change, by holders of the maximum number of
shares of Common Stock into which Notes could have been converted
immediately prior to such recapitalization, reclassification or change,
all subject to further adjustment as provided herein.
(v) Reorganizations, Mergers, Consolidations or Sales of
Assets. If at any time or from time to time on or after the Original
Issuance Date there is a capital reorganization of the Common Stock (other
than a recapitalization, subdivision, combination, reclassification or
exchange of shares provided for elsewhere in this subsection (e)) or a
merger or consolidation of the Company with or into another corporation,
or the sale of all or substantially all of the Company's properties and
assets to any other person, then, as a part of such reorganization,
merger, consolidation or sale, provision shall be made so that the holders
of the Notes shall thereafter be entitled to receive upon conversion of
the Notes the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization,
merger, consolidation, or sale. In any such case, appropriate adjustment
shall be made in the application of the provisions of this subsection (e)
with respect to the rights of the holders of the Notes after the
reorganization, merger, consolidation or sale to the end that the
provisions of this subsection (e) (including adjustment of the Conversion
Price then in effect and the number of shares issuable upon conversion of
the Notes) shall be applicable after that event and be as nearly
equivalent as may be practicable.
(vi) No Adjustments in Certain Circumstances. No adjustment in
the Conversion Price shall be required unless such adjustment would
require an increase or decrease of at least one ($0.01) cent in such
price; provided, however, that any adjustments which by reason of
this subsection (vii) are not required to be made shall be carried
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forward and taken into account in any subsequent adjustment required
to be made hereunder. All calculations under this Section 6(d)(vii)
shall be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be.
E. No Impairment. The Company will not directly and/or indirectly
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company but will at all times in good faith assist
in the carrying out of all the provisions of this Section 6 and in the taking of
all such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Notes against impairment.
F. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 6,
the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the holder of
this Note(s) a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Company shall, upon the written request at any time of the holder of this
Note(s), furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) Conversion Price at
the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of the this Note(s).
G. Stock Purchase Rights. If at any time or from time to time, the
Company grants or issues to the record holders of the Common Stock any options,
warrants or rights (collectively, "Stock Purchase Rights") entitling any holder
of Common Stock to purchase Common Stock or any security convertible into or
exchangeable for Common Stock or to purchase any other stock or securities of
the Company, the holder of this Note(s) shall be entitled to acquire, upon the
terms applicable to such Stock Purchase Rights, the aggregate Stock Purchase
Rights which the holder of this Note(s) could have acquired if it had been the
record holder of the maximum number of shares of Common Stock issuable upon
conversion of this Note(s) on both (x) the record date for such grant or
issuance of such Stock Purchase Rights, and (y) the date of the grant or
issuance of such Stock Purchase Rights.
H. Limitation on Conversion. Except to allow the conversion and sale
of the Conversion Shares in a merger, combination or similar transaction, or
upon a liquidation or distribution of assets of the Company or similar
transaction, in no event shall the Payee be entitled to convert, any Principal
Amount in excess of that amount upon conversion of which the sum of (1) the
number of shares of Common Stock beneficially owned by the Payee or the holder
of Conversion Shares and its affiliates (other than shares of Common Stock which
may be deemed beneficially owned through the ownership of the unconverted
portion of this Note, and (2) the number of shares of Common stock issuable upon
the conversion of this Note with respect to which the determination of this
provision is being made, would result in beneficial ownership by the Holder and
its affiliates of more than 9.99% of the outstanding shares of Common Stock of
the Company (after taking into account the shares to be issued to the Payee or
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the holder of Conversion Shares upon such conversion). For purposes of this
provision to the immediately preceding sentence, beneficial ownership shall be
determined by the Holder based upon and in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13 D-G thereunder,
except as otherwise provided in clause (1) of such provision.
I. Stamp Taxes, etc. The Company shall pay all documentary, stamp or
other transactional taxes attributable to the issuance or delivery of shares of
Common Stock, upon conversion of this Note; provided, however, that the Company
shall not be required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for such shares
in a name other than that of the holder of this Note, and the Company shall not
be required to issue or deliver any such certificate unless and until the person
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the Company's satisfaction that such tax
has been paid.
J. Validity of Stock. All shares of Common Stock which may be issued
upon conversion of this Note will, upon issuance by the Company in accordance
with the terms of this Note, be validly issued, free from all taxes and liens
with respect to the issuance thereof (other than those created by the holders),
free from all pre-emptive or similar rights and fully paid and non-assessable.
K. Reservation of Shares. The Company covenants and agrees that it
will at all times have authorized and reserved, solely for the purpose of such
possible conversion, out of its authorized but unissued shares, a sufficient
number of shares of its Common Stock to provide for the exercise in full of the
conversion rights contained in this Note.
L. Notice of Certain Transactions. In case at any time:
(i) The Company shall declare any dividend upon, or other
distribution in respect of, its Common Stock; or
(ii) The Company shall offer for subscription to the holders
of its Common Stock any additional shares of stock of any class or any
other securities convertible into shares of stock or any rights to
subscribe thereto; or
(iii) There shall be any capital reorganization or
reclassification of the capital stock of the Company, or a sale of all or
substantially all of the assets of the Company, or a consolidation or
merger of the Company with another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing corporation and
which does not result in any reclassification); or
(iv) There shall be a voluntary or involuntary dissolution;
liquidation or winding-up of the Company; then, in any one or more of said
cases, the Company shall cause to be mailed to the Payee at the earliest
practicable time (and, in any event not less than twenty (20) days before
any record date or other date set for definitive action), written notice
of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or
such reorganization, reclassification, sale, consolidation, merger or
dissolution, liquidation or winding-up shall take place, as the case may
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be. Such notice shall also set forth such facts as shall indicate the
effect of such action (to the extent such effect may be known at the date
of such notice) on the Conversion Price and the kind and amount of the
shares of stock and other securities and property deliverable upon the
conversion of this Note. Such notice shall also specify the date as of
which the holders of the Common Stock of record shall participate in said
dividend, distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property deliverable
upon such reorganization, reclassification, sale, consolidation, merger or
dissolution, liquidation or winding-up, as the case may be.
Nothing herein shall be construed as the consent of the Holder of this
Note to any action otherwise prohibited by the terms of this Note or as a waiver
of any such prohibition.
7. Waivers.
A. No failure or delay on the part of the Payee in exercising any
power or right under this Note shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No notice
to or demand on the Company in any case shall entitle it to any notice or demand
in similar or other circumstances. No waiver or approval by the Payee shall,
except as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
B. To the extent that the Company makes a payment or payments to the
Payee, and such payment or payments or any part thereof are subsequently for any
reason invalidated, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied, and all rights
and remedies therefor, shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
8. Miscellaneous.
A. Parties in Interest. All covenants, agreements and undertakings
in this Note binding upon the Company or the Payee shall bind and inure to the
benefit of the successors and permitted assigns of the Company and the Payee,
respectively, whether so expressed or not.
B. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York without regard to
the conflicts of laws principles thereof. The parties hereto hereby irrevocably
agree that any suit or proceeding arising directly and/or indirectly pursuant to
or under this Agreement, shall be brought solely in a federal or state court
located in the City, County and State of New York. By its execution hereof, the
parties hereby covenant and irrevocably submit to the in personam jurisdiction
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of the federal and state courts located in the City, County and State of New
York and agree that any process in any such action may be served upon any of
them personally, or by certified mail or registered mail upon them or their
agent, return receipt requested, with the same full force and effect as if
personally served upon them in New York City. The parties hereto expressly and
irrevocably waive any claim that any such jurisdiction is not a convenient forum
for any such suit or proceeding and any defense or lack of in personam
jurisdiction with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to payment from the
other party hereto of its reasonable counsel fees and disbursements.
C. Notices. All notices required or permitted under this Note shall
be given in accordance with the Subscription Agreement.
D. Waiver of Jury Trial. THE PAYEE AND THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND
DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE PAYEE OR THE COMPANY.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE'S PURCHASING THIS NOTE.
IN WITNESS WHEREOF, this Note has been executed and delivered on the date
specified above by the duly authorized representative of the Company.
NEWTOWN LANE MARKETING, INCORPORATED
By:
---------------------------------
Name:
Title:
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EXHIBIT I
NEWTOWN LANE MARKETING, INCORPORATED
CONVERSION NOTICE
Reference is made to the 10% Senior Convertible Promissory Note (the
"Note") of Newtown Lane Marketing, Incorporated. (the "Company"). In accordance
with and pursuant to the Note, the undersigned hereby elects to convert such
Principal Amount (as defined in the Note) all accrued but unpaid interest
indicated below into shares of common stock (the "Common Stock"), of the
Company, as of the date specified below.
Date of Conversion: ______________________________________________________
Principal Amount to be converted: ________________________________________
Accrued but unpaid interest to be converted: _____________________________
Note to be Converted: NLMIN Note No.: ____________________________________
Number of Shares of Common Stock to be issued on conversion of Principal
Amount and/or all accrued but unpaid interest: ___________________________
Conversion Price Used: ___________________________________________________
Please deliver the Common Stock into which the Principal Amount is being
converted to the following address:
________________________________
________________________________
________________________________
________________________________
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